Roche plots layoffs as it focuses on R&D

Roche has confirmed that it plans to cut jobs, as reported by newspaper Sonntag earlier this week. Billing it as an "Operational Excellence initiative," Roche says it will review it structure over the coming months and make a formal layoff announcement by the end of the year. It will be implemented during 2011 and 2012. "In view of mounting pressures to curb healthcare costs--especially in the United States and Europe--together with recent developments in late-stage projects in the Roche pipeline, this initiative aims to adapt cost structures and accelerate productivity improvements Group-wide," the company says in a statement. Roche adds that it will devote more resources to treatments and diagnostic tools that will meet the needs of a changing healthcare environment.

Although Roche CEO Severin Schwan (photo) says in a statement that the company is launching the restructuring from a "position of strength," Pharmalot notes that the Swiss drugmaker has been hit with a series of recent pipeline setbacks that have caused some concern. Roche has delayed development of its potential blockbuster Type 2 diabetes drug taspoglutide for up to 18 months due to hypersensitivity problems observed in trial subjects. In addition, the FDA handed Roche and Genentech a refuse-to-file letter for the developers' BLA for trastuzumab-DM1. Trials of rheumatoid arthritis drug ocrelizumab were suspended, and the FDA is reviewing a breast cancer indication for blockbuster drug Avastin. "The net effect is that we have had to revise our revenue forecasts and must now adapt our business and manage our costs more carefully so as to safeguard our funding of innovation," the company says in a memo.

Roche provided no further details on the cuts. "Cost savings could easily reach 2 billion Swiss francs ($1.9 billion) as of 2012 to 2013, which would boost our earnings per share forecast by some 10 percent," Helvea analysts Odile Rundquist and Karl-Heinz Koch tell Reuters.